Petition of Stylemaster Dept. Store, Inc.

• Decision Date: 26 May 1955
• Citation: 154 N.Y.S.2d 58,7 Misc.2d 207
• Parties: Petition to Set Aside the Election of Directors of STYLEMASTER DEPARTMENT STORE, Inc., Purported to Have Been Held on
• Court: New York Supreme Court

Page 58

154 N.Y.S.2d 58

7 Misc.2d 207

Petition to Set Aside the Election of Directors of

STYLEMASTER DEPARTMENT STORE, Inc., Purported to Have Been

Held on May 26, 1955, and the Election of Officers of Said

Corporation, Purported to Have Been Held on June 6, 1955.

Supreme Court, Westchester County.

May 23, 1956.

Myle J. Holley, New York City, for petitioner.

Abraham Karp, New York City, for respondents.

GALLAGHER, Justice.

Motion to set aside, as illegal and void, an election of directors and an election of officers of Stylemaster Department Store, Inc. hereinafter referred to as 'the corporation.'

The following facts are undisputed. On May 11, 1955, stockholders whose combined holdings of stock in the corporation aggregated approximately 72% of that outstanding, sent to the board of directors a letter requesting the board to call a special meeting of stockholders for the purpose of electing a new board of directors. Thereafter, the corporation's secretary sent to each of the five stockholders, including petitioners, a notice of a special meeting of stockholders, stating therein that the purpose was to elect a new board of directors.

At the stockholders' meeting, held on May 26, 1955, and attended in person or by proxy by the holders of all outstanding stock, including petitioners, a new board of directors was elected. Petitioners were replaced as directors. On June 6, 1955, the new board of directors met and elected officers. Petitioner William Zornetzer was replaced as President.

Before there can be a consideration of petitioners' objections on the merits, disposition must be made of respondents' contention that petitioners are barred by the limitation of four months contained in Section 1286 of the Civil Practice Act.

The cases hold that where the act complained of is illegal, the wrong is a continuing one, and the limitation of time does not commence to run until there has been a demand by the complainant for his rights, and a refusal thereof by the respondents. Cash v. Bates, 301 N.Y. 258, 93 N.E.2d 835; Toscano v. McGoldrick, 300 N.Y. 156, 89 N.E.2d 873; Mallen v. Morton, 300 N.Y. 478, 88 N.E.2d 660; Millicker v. Board of Education of Central School Dist. No. 1, etc., 300 N.Y. 634, 90 N.E.2d 492; Foy v. Brennan, 285 App.Div. 669, 140 N.Y.S.2d 132; Alliano v. Adams, Sup., 140 N.Y.S.2d 443; Kenny v. Loos, 286 App.Div. 97, 140 N.Y.S.2d 817; Wyatt v. Armstrong, 186 Misc. 216, 59 N.Y.S.2d 502.

If a wrong exists in this case, it arose as a result of an illegal act, and therefore is a continuing wrong. There is nothing in the record to indicate that there has been a demand by petitioners and refusal by respondents.

The first three of petitioners' objections will be considered together. Petitioners allege that the request for a meeting of stockholders was never referred to the board, that no meeting of the board was held to pass on it, and the secretary had no authority to send out notices of the meeting. Respondents allege there was an informal meeting of directors, including petitioners, at which it was decided to call a special meeting in accordance with the request, after which the secretary was instructed to send out notices.

If there was such an informal meeting, petitioners objections are of no avail, since all the directors would have passed on the request, and it has been held that in cases of close corporations, where the directors are in frequent contact with each other, it is unnecessary to hold a formal meeting in order to make a decision. Matter of Doelger's Estate, 254 App.Div. 178, at pages 186-187, 4 N.Y.S.2d 334, at pages 341-342; Simonson v. Helburn, 198 Misc. 430, 97 N.Y.S.2d 406. Even if such informal meeting did not take place, it is the Court's opinion that since petitioners received the notice of meeting, which recited the purpose of the meeting and that it was being called at the request of stockholders, and having attended the meeting without protest as to the failure of the board to meet formally to pass on the request, or to the authority of the secretary to send out the notices, they cannot now be heard to object to these omissions. Frankel v. 447 Central Park West Corp., 176 Misc. 701, 28 N.Y.S.2d 505, affirmed 263 App.Div. 950, 34 N.Y.S.2d 136; Matter of Keller, 116 App.Div. 58, 101 N.Y.S. 133; In re Roosevelt Leather Hand Bag Co., Inc., Sup., 68 N.Y.S.2d 735; Kahn v. Blinn, Sup., 60 N.Y.S.2d 413. Petitioners' participation without objection in the meeting was adequately pleaded by respondents.

In passing, if, as petitioners claim, the request for a stockholders' meeting was not...